It is common practice for landlords to take a deposit from their tenant to protect against breaches of the tenancy agreement, including failure to pay rent or bills, damage to the furniture and property.
Since the 6 April 2007 all landlords who take a deposit from their tenant on an Assured Shorthold Tenancy (AST) in England and Wales must protect it in a government-authorised deposit protection scheme. By law, the deposit must be protected within 30 days of receiving it from the tenant.
On 6th April 2012 changes to the legislation were enacted via the Localism Act allowing landlords more time to protect a tenant's deposit. The changes mean that landlords now have 30 days to protect the deposit and provide the Prescribed Information to the tenant, however it has also closed loopholes and penalties for non-compliance will be strictly enforced. Prior to the changes, landlords were required to protect the deposit and provide the required information within 14 days of receiving the deposit. A summary of the TDP changes, including FAQ's can be found on the Department for Communities and Local Government website.
The Housing Act 2004 states that the deposit remains the tenant’s money, regardless of the fact they have handed it to you. It was introduced to help ensure that tenants are able to recover their deposit at the end of their tenancy if they honour the terms of their tenancy agreement. At the end of the tenancy if the terms have been broken you and the tenant have the opportunity to discuss the return of the deposit and any deductions from it. The tenant can raise a dispute to reclaim the deposit amount if they are unhappy with the amount you wish to withhold. You must provide evidence to prove your entitlement to the deducted deposit amount. mydeposits offers a free and independent Alternative Dispute Resolution (ADR) service to resolve your dispute. The alternative is to use the court to resolve to resolve the dispute.
Failure to protect a deposit can result in the following penalties should the tenant decide to take action:
• You will be unable to obtain a Court Order to regain possession of the property (under Section 21 of the Housing Act 1988) unless and until the deposit is protected.
• You will be required to either return the deposit to your tenant or to lodge the full amount with the authorised custodial tenancy deposit scheme.
• You may be instructed to pay your tenant compensation between one and three times the amount of the deposit within 14 days of a Court Order.
You must also provide the tenant with key information relating to the deposit protection, called the Prescribed Information. This includes details about the scheme used to protect the deposit, instructions about disputes and key contact information. We provide our members with the majority of this information in the Deposit Protection Certificate that is produced when you protect a new deposit, along with the Information for Tenants guide. You must provide all this information to your tenant within 30 days of receiving the deposit from your tenant.
mydeposits is one of three government-authorised deposit protection schemes. Landlords can join mydeposits and then pay a deposit protection fee to protect each tenant deposit. This protection enables you to hold on to the deposit in your bank account for the duration of the tenancy, and then return the agreed amount to the tenant at the end of their stay.